The pandemic and the booming luxury industry

While small businesses have been struggling with the pandemic-hit economy since the start of the global health crisis, the opposite is true for several high-end brands.

Recently, British luxury car manufacturer Rolls Royce announced that in 2021, worldwide car sales reached a record level in their 117-year history.

The Sussex-based company, owned by auto manufacturing giant BMW, reported sales growth in every region they operate.

But it’s not just cars. Exclusive French brands like Dior and Louis Vuitton have experienced a surge in revenues especially after the cooling off of Covid-19 restrictions.

A Bain & Company Luxury study calls recent times a ''surging performance that has no match'', looking at studies from the past two decades.

So much so that Bain & Co partner, and the study's director, Claudia D'Arpizio, underlines that they expect the pandemic to be a turning point in luxury consumption, almost like a Renaissance.

Even though the increase in vaccination rates, the end of lockdowns and the removal of international travel restrictions have a great effect on this, for some, these are not the sole reasons.

"You should actually ask my sister or my mom instead of me. Because they are the ones who would have caused my bankruptcy during this period," an Arab multi-millionaire tells TRT World, who wishes not to be named.

Asked whether the pandemic has changed his spending behaviour, he says, “You know what, for me and my family... This period showed us that it is not clear whether we will live tomorrow or not. So if you have a chance, I think you have the right to spend some according to your wishes.”'

When asked what he bought recently, he said, ''Audemars Piguet watches for my two guests and an emerald necklace for my mother.''

Now the millionaire's spending may not come as a surprise, as he was always inclined towards luxury and he may have always spent like that, pandemic or no pandemic.

This week, Italian company Prada Group, which owns some of the world's most prestigious luxury brands like Prada, Miu Miu, Car Shoe and Church's brands, reported "robust" growth last year, driven by strong sales despite the continuing disruption of the coronavirus pandemic.

According to initial figures adjusted for exchange rate changes, the group’s revenues for 2021 reached $3.8 billion, up 41 percent from 2020 and up eight percent compared to 2019.

In this regard, the group indicated that the second half of 2021 "showed significant improvement in terms of revenues, margins and cash generation.''

''It would not be right for me to take the initiative and say something for our Italy-based brand, but according to the numbers shown, yes, it displays that there is such a trend,'' said the manager of a Prada store in Istanbul.

Moreover, Prada Group chief executive Patrizio Bertelli drew attention to this remarkable success.

"2021 was a year full of challenges but we proved to be ready and quickly responded to the needs of an extremely dynamic market," Bertelli said. 

But what’s behind the surge?

"I would buy this bag anyway, with or without covid," says 28-year-old Müge Erdem says, as she pays over a thousand dollars for a small white Prada bag.

''But of course, not being able to enter the stores during the restriction period and not able to touch the products may have left us longing for them,'' Erdem added.

''Covid was not easy for those who love shopping, obviously. While we didn't want to leave the stores, we were locked in houses," said another Prada customer in the Istanbul store, who called herself a shopaholic.

Trends

But it wasn’t just high net worth individuals, conspicuous consumption even affected middle income buyers who spent frivolously during a pandemic.

''I think we become thirsty for shopping when we were stuck at home under depression, isn't the formula for happiness shopping for women? When the lockdowns were lifted we rushed to the stores as if it was not enough to order online,'' said Osman Demir, a 27-year old tradesman who runs his family's shoe shop in Istanbul’s Grand Bazaar.

''Our shop may not be able to compete with luxury brands, but even here there is an increase in sales,'' he added while laughing.

But luxury brands also adopted online shopping channels, though the transition is a little more difficult than other sectors due to their high prices, structures that highlight a one-on-one experience, or doubts that they could persist to be a status indicator via digital channels.

However, as the pandemic made it a necessity, all luxury brands abandoned their conservative norms and spread to the online market as an income strategy.

To take Prada as an example, sales in shops directly run by this brand rose 27 percent with an online shopping trend in the second half of the year compared to 2020 and 21 percent against 2019 levels.

In general, online luxury sales reached over $56 billion at the end of 2020, an $18 billion surge compared to 2019, according to estimates by Bain & Company. 

More interestingly, the allocation of purchases made online for luxury goods nearly reached 23 percent of total sales in 2020.

Additionally, the “Global Powers of Luxury Goods” research highlights that consumers are evidently seeing the future of luxury as digital.  

More than 37 percent of consumers feel that luxury products and technology will be more closely related.

''Honestly, for me, it's not about buying luxury things to live 'creme de la creme' but it's about me being a vegan,'' says 26-year-old Yasemin Donmez who is a psychology student in Istanbul.

Donmez isn’t talking about just what she puts inside her body, but also what she puts on it.

Luxury brands that embrace organic ways to produce luxury goods within the framework of sustainable fashion, attract animal lovers and environmentalists.

''It's not like I'm saying that I'm buying everything from luxury brands now, but they got my sympathy recently with their vision. So I check on them more now,'' Donmez added.

There are many reasons for the increase in luxury interest during the Covid-19 period. While these reasons are different for everyone, one thing seems to ring true: people love luxury. And despite many difficulties during the pandemic period, people have a hard time saying no to a Chanel or a Prada bag.